Intangible assets,IFRS and analysts’ earnings forecasts

We investigate whether the adoption of International Financial Reporting Standards (IFRS) in 2005 by Australian firms has been associated with a loss of potentially useful information about intangible assets. We find that the negative association between the accuracy and dispersion of analysts’ earnings forecasts and aggregate reported intangibles previously documented by Matolcsy and Wyatt (2006 ) becomes stronger subsequent to IFRS adoption, primarily for firms with high levels of underlying intangible assets. Our result is largely attributable to reported goodwill, rather than other intangible assets, suggesting that the impairment approach to goodwill valuation required by IFRS conveys more useful information than does the former straight‐line amortization approach. When we investigate a sub‐sample of firms that report lower intangibles under IFRS than under the prior Australian GAAP, we do find some evidence consistent with a loss of useful information relating to intangibles.     

Identifiable intangible asset disclosures, stock prices and future earnings

As a consequence of regulatory reforms currently being initiated as part of international convergence, it is likely that the recognition and disclosure of identifiable intangible assets by Australian firms will cease. This study provides empirical evidence on how this will impact financial reports. First, evidence is provided of a positive association between stock prices and voluntarily recognized and disclosed identifiable intangible assets. Second, evidence is provided of a positive association between identifiable intangible assets and realized future period income. This provides insights into the nature of the information provided by intangible assets, and identifies a basis for the association between stock prices and identifiable intangible assets. This leads to the conclusion that identifiable intangible assets disclosures are value relevant, and that with the application of the restrictive recognition rules in AASB138 these disclosures in financial reports will be greatly diminished.     

The measurement and recognition of intangible assets: then and now

“In the Fortune 500 there are thousands upon thousands of statistics that reveal very little that’s meaningful about the corporations they purportedly describe. At least that’s the verdict of a growing number of forward-thinking market watchdogs, academics, accountants, and others.”(Fortune, April 2001). In today’s economy value is often created by intangible (intellectual) capital. The accounting profession has not met the challenge of measuring and reporting the results of knowledge-based entities. The Federal Reserve Bank of Philadelphia estimates that in the year 2000 more than US$ 1 trillion was invested in Intangibles. The problems relating to the measurement and recognition of intangibles are international in scope.This paper reviews existing and recently promulgated US, UK, and IASC accounting standards relating to Intangibles. Inconsistencies in the measurement and reporting of Intangibles under US Generally Accepted Accounting Principles (GAAP) are highlighted, and evidence is provided that suggests that recognition of Intangible (Intellectual) Capital is in accordance with existing accounting principles In particular, the newly promulgated Financial Accounting Standards Statements on Business Combinations, Goodwill, and other Intangibles is reviewed. The objective of the comparisons to UK and IASC standards and the review is to provide evidence that will improve the measurement and reporting of intangible (intellectual) capital and facilitate harmonization. Improving the global financial reporting infrastructure will ultimately lead to the reporting of relevant and reliable quality earnings.     

Value relevance of customer-related intangible assets

This study examines the stock market's valuation of customer-related intangible assets for a sample of publicly-traded U.S. firms. Customer-related intangible assets are found to be positively associated with equity prices, but valued at a discount relative to goodwill. These results suggest that value-relevant information is lost if customer-related intangible assets are subsumed into goodwill rather than being reported separately. This evidence can be useful to standard setters potentially considering extending to public companies a recent FASB Accounting Standards Update allowing private companies not to recognize separately from goodwill certain customer-related intangible assets.     

Accounting standards and value relevance of financial statements: An international analysis

Using 17,743 firm-year observations of industrial companies in 21 countries from 1991 to 1997, this paper finds that the use of accrual accounting (versus cash accounting) negatively affects the value relevance of financial statements in countries with weak shareholder protection. This negative effect, however, does not exist in countries with strong shareholder protection. These findings are consistent with the belief that shareholder protection improves the effectiveness of accrual accounting, and suggest the importance of considering shareholder protection when formulating accounting policies related to accruals.     

IFRS framework-based case study: Barrick Gold Corporation—Goodwill for Gold

The case of Barrick Gold Corporation: Goodwill for Gold utilizes a framework-based approach to examine the objectives, underlying concepts, and relevant IFRS guidance applied to goodwill. The questions presented in the case study progressively lead from the broad concepts underlying the preparation of financial data, in general, to the International Accounting Standards concerning recognition, measurement, and subsequent treatment of goodwill, specifically IFRS 3, IAS 36, and IAS 38. It challenges you to determine if these standards are consistent with the underlying concepts set forth in the IFRS’s conceptual Framework. This case illustrates the importance of professional judgment in the standard setting process by requiring you to examine the IASB’s published supporting documents including the Board’s Basis for Conclusions. In addition, the case includes a practical application problem that requires you to determine the financial statement effects of the subsequent treatment of goodwill.     

The role of a crisis in reshaping the role of accounting

Prior to 2001, international accounting standards (IAS) were insufficiently attractive to gain the support of US regulators. The potential role of IAS in the US gained prominence during a period of extreme financial reporting instability in 2001–2002. Emerging opinion increasingly upheld principles-based rather than rules-based accounting standards in the face of the financial reporting crisis. But to promote any active shift in the US position, an institutionally legitimate infrastructure for the international accounting standards setter had to be created. As this was taking shape, the globalisation of business activities grew with inter-organizational linkages and cross-national financial inter-dependencies and flows becoming increasingly complex. Given the extensively uncertain, uneven and constantly evolving nature of global business changes, the aptness of applying judgment in assessing financial performance and position rather than relying on the application of pre-defined rules continued to achieve wider acceptance. The argument is made in the paper that international financial reporting standards are today seen to fulfil a global risk mitigating role founded on a logic that had to first gain political and institutional legitimacy and that also had to be viewed as being responsive to perceived market imperatives.     

Impact of International Financial Reporting Standard adoption on key financial ratios

Although previous research has investigated the economic consequences of International Financial Reporting Standard (IFRS) adoption, there is little evidence on the impact of IFRS adoption on key financial ratios. To fill this gap, we examine this issue in a continental European country (Finland). Our results show that the adoption of IFRS changes the magnitude of the key accounting ratios. Moreover, we extend the literature by showing that the adoption of fair value accounting rules and stricter requirements on certain accounting issues are the reasons for the changes observed in accounting figures and financial ratios.     

Firm incentives,institutional complexity and the quality of “harmonized” accounting numbers

In this paper, we investigate how firm reporting incentives and institutional factors affect accounting quality in firms from 26 countries. We exploit a unique multicountry setting where firms are required to comply with the same set of international reporting standards. We develop an approach of cross-country comparisons allowing for differences between firms within a country and we investigate the relative importance of country- versus firm-specific factors in explaining accounting quality. We find that financial reporting quality increases in the presence of strong monitoring mechanisms by means of ownership concentration, analyst scrutiny, effective auditing, external financing needs, and leverage. Instability of business operations, existence of losses, and lack of transparent disclosure negatively affect the quality of accounting information. At the country level, we observe better accounting quality for firms from regulatory environments with stronger institutions, higher levels of economic development, greater business sophistication, and more globalized markets. More importantly, we find that firm-specific incentives play a greater role in explaining accounting quality than countrywide factors. This evidence suggests that institutional factors shape the firm's specific incentives that influence reporting quality. Our findings support the view that the global adoption of a single set of accounting standards in isolation is not likely to lead to more comparable and transparent financial statements unless the institutional conditions and the firm-specific reporting incentives also change.     

The FASB exposure draft on accounting for business combinations and intangible assets: an instructional assignment

Accounting standards are constantly evolving to meet the needs of a rapidly changing business environment and changes in accounting theory. Accounting students need to be familiar with the content of Exposure Drafts, since these documents reflect the Financial Accounting Standards Board's (FASB) position on current financial reporting issues. Students are generally not well versed on the standard setting process and how contextual factors affect this process. The purpose of this instructional assignment is to enhance students' understanding of how contextual factors affect the standard setting process within the context of the Exposure Draft on “Business Combinations and Intangible Assets.” The assignment requires that students examine the Exposure Draft and answer questions designed to elicit responses as to why the FASB is considering a new standard and the impact the standard would have on current accounting procedures and financial statements.     

Application of Anglo-American Principles of Consolidation to Corporate Financial Disclosure in Japan

The adoption by Japan of consolidated corporate reporting in 1977 may be viewed as an instance of the international transfer of Anglo-American practices of corporate reporting, and as a step towards international harmonization of accounting. Consolidation practices in Anglo-American nations are based on assumptions about the nature of corporate group associations. This paper examines the applicability of these assumptions to the corporate context in Japan. Personal interviews and analyses of group associations of listed Japanese corporations support three principal findings: (i) that historical and cultural determinants provide significant contrasts between corporate group associations in Japan and Anglo-American nations; (ii) that Anglo-American methods of consolidation fail to reflect adequately the nature of corporate group associations in Japan; and (iii) that the adoption of consolidation in Japan represented a response to situation-specific change stimuli rather than a general acceptance of the intrinsic merit of consolidation. The findings have implications for international accounting.     

IFRS Adoption and Stock Prices of Japanese Firms in Governance System Transition

This study examines firms' decision to voluntarily adopt IFRS in a setting where there are changes to the governance system in a traditionally code law country, as well as how the market responds to such decisions. We find the probability of voluntary IFRS adoption to be higher among firms that have a high proportion of foreign shareholders, undertake quality audits, have low levels of leverage, feature a nominating committee, and are included in the new market index. In addition, the stock prices of IFRS adopters tend to increase around the announcement date of IFRS adoption, compared to those of non-adopters. Finally, market reactions are smaller for firms that feature a nominating committee, and are included in the new market index—perhaps because IFRS adoption by these firms is less surprising to market participants, and because IFRS adoption is not expected to add large incremental value to these firms.     

高校无形资产预算管理初探

无形资产是我国高校的宝贵财富,但目前大多数高校无形资产管理处于空白状态,无形资产的预算管理更是如此。本文试从分析高校无形资产预算管理现状背后的原因出发,尝试把全面预算管理引入到无形资产到管理中。     

Intangible assets and value relevance: Evidence from the Portuguese stock exchange

We assess the value relevance of the amounts for identifiable intangible assets and goodwill reported in the financial statements of all non-finance companies listed on the main market of the Portuguese Stock Exchange from 1998 to 2008. Additionally, we use panel data to explore the impact on value relevance of Portugal’s formal adoption of International Accounting Standards [IAS] and International Financial Reporting Standards [IFRS] in 2005. A distinctive feature of the accounting by our sample companies is that when they adopted IAS 38 and IFRS 3 in 2005, they were no longer required to recognise some intangible assets (such as start-up costs and research expenditures) and were no longer required to amortise goodwill.We find that net earnings, reported goodwill and other intangible assets are highly significantly associated with stock price. However, whereas earnings are related positively to stock prices when Portuguese Generally Accepted Accounting Principles (GAAP) were applied prior to 2005, the value relevance of earnings appears to have declined after the adoption of IAS/IFRS in 2005. Although the change to IAS/IFRS had no impact on the value relevance of identifiable intangibles as a whole, the evidence suggests that there was a positive effect on the value relevance of goodwill. When the subclasses of identifiable intangible assets are considered, we found evidence of an increase in value relevance of goodwill, other intangible assets, and research and development expenditures.     

Using contractual incentives in district nursing in the English NHS: results from a qualitative study

Since 2008, health policy in England has been focusing increasingly on improving quality in healthcare services. To ensure quality improvements in community nursing, providers are required to meet several quality targets, including an incentive scheme known as Commissioning for Quality and Innovation (CQUIN). This paper reports on a study of how financial incentives are used in district nursing, an area of care which is particularly difficult to measure and monitor.     

The effect of recognition vs. disclosure on investor valuation: The case of pension accounting

Whether or not the format of financial reporting influences user assessment of the reported information is an important issue to the Securities and Exchange Commission (SEC), the Financial Accounting Standards Board (FASB), and managers. Do investors, in determining security prices, differentiate between information recognized in the balance sheet and that disclosed in the footnotes? The findings indicate that investors appear to consider pension information disclosed in the footnotes as value-relevant, given that an accrued (prepaid) pension liability (asset) is also recognized in the balance sheet. Second, investors attach equal importance to both sorts of pension information.